Watch stocks you care about

They got burned on their sensationalist claims that hydraulic fracturing caused flaming faucets. They were sunk by their own studies showing that fracking was responsible for groundwater contamination. They've sent in the Justice Department to harry the biggest names in the industry over so-called anti-competitive practices. Now the government's newest assault on the practice comes from the Occupational Safety and Health Administration, which is proposing new, stricter regulations on the sand that's used in the fracking process.

Fracking, which has been done for more than 60 years, is a process in which drillers pump large amounts of water, fluids, and chemicals deep into the ground under high pressure and cause the shale rock to crack. The fluids contain sand or ceramic beads called proppants that prop open the fissures and allow the gas and oil to flow more freely.

U.S. Silica (NYSE: SLCA) is the second largest domestic producer of fracking sand behind privately held Unimin, a division of Belgian giant Sibelco, while Carbo Ceramics (NYSE: CRR) is the world's largest ceramic bead maker, though it also provides sand. Where it saw ceramic proppant volumes decline 14% in the latest quarter, sand volumes surged fivefold. U.S. Silica saw its volumes jump 15% to 2 million tons.

According to the Minnesota Department of Natural Resources, some 10,000 tons of silica sand are used in each well. So important is material to oil and gas drilling that EOG Resources (NYSE: EOG) sought to become more vertically integrated by buying its own sand mines in 2008.

But as the practice has grown exponentially, environmental activists and regulators suggest that the sand itself presents a health hazard to workers much the way asbestos does. Silica isn't like beach sand, but rather is a much finer, purer material. Imagine clouds of dust billowing up when a saw cuts through concrete, and you get the idea of what they're suggesting workers are breathing in.

While the Obama administration estimates 700 lives a year can be saved by putting new rules in place, industry representatives say the current regulations already adequately protect workers because they reduce or completely eliminate the risk of breathing in the fine particulates. Moreover, the cost of the new regs would be huge. The new rules also apply to industries outside oil and gas, and the metal-casting industry alone says they will cost about $1.5 billion annually to implement.

Under the proposal, companies would have to cut in half the amount of silica exposure currently allowed for general industry and maritime workers, and by 80% in the construction industry. Part of the problem with the new rules, however, is there is a dearth of certified labs available that can measure the levels of silica dust OSHA wants to reduce them to, though the agency has magnanimously said it would be willing to delay the lab requirements for two years to allow the industry to catch up.

Most fracking sand is mined in Wisconsin because of its quartz purity (it needs to be about 99% quartz) and its high compressive strength, which needs to be between 6,000 and 14,000 psi, though Minnesota and several other states have a significant industry presence as well. Much of the sand is delivered to oil and gas industry services providers such as Halliburton, Schlumberger, and Baker Hughes, the very companies being targeted by the Justice Department probe.

Last year, as both federal workplace regulators -- OSHA and the National Institute for Occupational Safety and Health -- issued a safety alert over silica dust exposure, Wisconsin's natural resources department rejected a move to regulate silica sand as a hazardous air pollutant, noting that the public was sufficiently protected by current regulations.

It would seem that when you combine this move with the other efforts of the administration to attack the oil and gas industry, the motto "if at first you don't succeed, try, try again" is the guiding principle at work thwarting future growth.

Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Well that's the second attempt by the enviro whacko industry to shut down fracking in the oil patch. Last week realizing they have lost every effort to stop fracking they went crying to the Interior Dept where our new "Jewel" is in charge and tried to get areas that the oil industry are exploring for hydrocarbons declared National Monuments now this nonsense.

Until stop their ability to sue and get paid win or lose and their tax exempt status these weirdos will continue to in their effort to drive this country to third world status,

Report This Comment

Sending report...

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.